Search Results

Showing results 1 to 3 of approximately 3.

(refine search)
SORT BY: PREVIOUS / NEXT
Keywords:financial covenants 

Discussion Paper
Counterparty Risk in Material Supply Contracts

Forming long-term partnerships with customers and suppliers often creates a competitive advantage for firms because it permits resource sharing, eases financial constraints, and encourages investment in relationship-specific capital. While these relationships can be beneficial, they also increase firms? exposure to their counterparties? risk. In a recent Staff Report, Anna Costello of MIT and I study two important and unanswered questions about supply relationships. First, what specific characteristics of the trade relationship make a firm more vulnerable to adverse spillovers from their ...
Liberty Street Economics , Paper 20150209

Report
Counterparty risk in material supply contracts

This paper explores the sources of counterparty risk in material supply relationships. Using long-term supply contracts collected from SEC filings, we test whether three sources of counterparty risk?financial exposure, product quality risk, and redeployability risk?are priced in the equity returns of linked firms. Our results show that equity holders require compensation for exposure to all three sources of risk. Specifically, offering trade credit to counterparties and investing in relationship-specific assets increase the firm?s exposure to counterparty risk. Further, we show that contracts ...
Staff Reports , Paper 694

Working Paper
EBITDA Add-backs in Debt Contracting: A Step Too Far?

Financial covenants in syndicated loan agreements often rely on definitions of EBITDA that deviate from the GAAP definition. We document the increased usage of non-GAAP addbacks toEBITDA in recent times. Using the 2013 Interagency Guidance on Leveraged Lending, which we argue led to an exogenous increase in non-GAAP EBITDA addbacks, we show that these addbacksincrease the likelihood of loan delinquency and default, and also increase the likelihood of the borrower experiencing a ratings downgrade. Greater use of non-GAAP EBITDA addbacks also makes it more likely that lead arrangers lower their ...
Working Papers , Paper 2022-029

FILTER BY year

FILTER BY Series

FILTER BY Content Type

FILTER BY Author

FILTER BY Jel Classification

G1 1 items

G14 1 items

G19 1 items

G21 1 items

G23 1 items

G28 1 items

show more (5)

PREVIOUS / NEXT